Post termination restrictions (restrictive covenants) are contractual clauses which may be contained within a contract of employment. They can also be included in settlement agreements for a departing employee. These are most common in contracts for senior employees who may be in possession of confidential information, have relationships with key clients and have influence over other staff members.
As a business owner, you need to protect your business and to do this, restrictive covenants could be essential.
There are five main types of post termination restrictions:
- Confidentiality clause – A duty to keep secret your (the employer) trade secrets or confidential information
- Non-solicitation clause – A duty not to approach any of your customers or potential customers with a view to doing business with them
- Non-dealing clause – prevents the ex-employee from doing business with your customers or potential customers even if the customer made the approach
- Non-compete clause – aims to prevent the ex-employee from working for a competitor in a competing capacity, or seeking to set up a competing business
- Non-poaching clause – aims to prevent ex-employees from trying to take your staff to their new employment or business.
You may also need to consider whether employees need to be placed on garden leave.
Restrictive covenants are a complex and continually evolving area of employment law. You need a professional on your side and specialist advice to ensure you have the best protection in place.